23/08/2023·2 mins to read
Are the residential restrictions in the Overseas Investment Act stifling housing development?
With consideration as to whether residential land should be caught under the Overseas Investment Act being back on the agenda pre-election, it is timely to reflect on whether the legislative changes introduced in 2018 are actually serving their purpose.
The 100-day election promise made by the Labour Government, and brought in through the coalition, was intended to stop foreigners buying up New Zealand’s residential housing stock. This was a perceived, rather than a statistically supported, risk and the legislation was rushed through without consideration of the implications for, and economic impact of, residential land development.
We have seen that the residential changes have far wider reach than we believe was necessary and far more detrimental economic impact than was likely contemplated. The broad definition of residential land captures not only buyers of a single residential dwelling, but also residential land developers, retirement village operators, tourism and resort developers and commercial businesses like service stations and hardware stores that often acquire residential land for non-residential purposes.
While residential land pathways have been incorporated into the legislation, this is just a cumbersome and administrative hoop for foreign residential land and retirement village operators to adhere to. Many of the country’s largest developers in these areas are overseas entities due, in the main, to their public listings on the stock exchange. While they are overseas owned, this is generally by small shareholdings that do not grant any controlling interests in those listed companies. Even some members of the Select Committee that considered the legislation were not aware that these listed entities would be caught by the amendments.
Residential land developers and retirement village operators are ultimately acquiring land to develop new housing stock for ownership or occupation by New Zealanders. Often, they are only holding the land for a short time. They are contributing to the housing stock, not reducing it.
The other developers (which may not even be overseas owned) that have been detrimentally affected by the broad definition of residential land are large apartment developers. They essentially lost a significant part of their market overnight with foreigners prohibited from buying the apartments.
Again, there are consent pathways that permit some limited foreign investment in these types of developments but, again, they seem to be unnecessary hoops to jump through, creating administrative and financial burden.
Consent is generally granted, and the application process simply causes unnecessary costs and delays. The Overseas Investment Office should be focussing its attention and resources on dealing with New Zealand’s far more sensitive land rather than undertaking box-ticking exercises for residential land developers.
It's time to consider whether we really want residential land developers, aged care facilities, key service businesses in residential areas and developers creating investment in New Zealand and our economy to be caught by this legislation.
Our view is that the residential land changes could easily be modified to protect our already developed residential housing stock but allow housing and other residential land development to continue.